No matter how much money you earn there’s always a limited quantity. And there always seems to be more stuff to buy than there is money to buy it with. If you’re not careful to manage your finances successfully, you can easily blow through a few hundred, or even a few million, each month.
Take Johnny Depp and his reported spending, for example. He made headlines for his nearly $2 million per month spending habits. It includes a $30,000 monthly bill for wine, $200,000 a month to maintain private planes, and staff and security costing a total of $450,000 per month. He also bought a 150-foot yacht for $18 million and maintains 14 homes and a chain of islands in the Bahamas.
While you may not be burning through a couple million each month, it’s important to consider your financial habits no matter how much or how little money you have. With that in mind, here are three ways to manage your finances successfully so you avoid going broke.
1. Keep an Eye on Your Cash
The key to a healthy money relationship is being proactive with your finances. To maintain a consistent level of control you must check your accounts often, balance income and expense reports, and have regular meetings with the financial professionals in your life. Even for a celebrity as well-known as Johnny Depp, ultimately, he’s the only person to blame for his financial woes. (For related reading, see: Managing Personal Finances: Your Annual Self-Check.)
2. Don’t Spend Without Limits
It may sound like age-old advice but “spending less than you earn” has been sage wisdom for many decades because it works. Spending less money than you earn is the best way to build wealth for the long term. Spending without limits, on the other hand, will eventually catch up with you—no matter how much money you have at your disposal. (For more from this author, see: How to Pay for College Without Lots of Debt.)
3. Regularly Review Your Spending Habits
For corporations to succeed, they must perform regular audits of how the company functions as well as review the profit-and-loss breakdown. If they fail to do this, it could spell disaster for the future of the company.
Likewise, it’s vital to regularly review your spending habits and locate areas where you can streamline. In the case of Johnny Depp, we know he spends millions of dollars each year to maintain his homes across the globe, including a 37 acre French chateau. Since you can only live in one location at any given time, it’s a good bet to say that he could offload some of these financial liabilities to streamline his expenses.
The Bottom Line
When it comes to managing millions of dollars, or only hundreds, the same rules apply to everyone. Be careful not to get too comfortable with your current financial situation. Money can be very unstable and your circumstances could change in an instant. Whether you’re a famous movie star or just an everyday Joe, it pays to follow a sound financial plan.
And if you need help with that plan, seek out the help of a qualified financial planner. You don’t have to do it alone.
(For more from this author, see: 8 Ways You Can Minimize Taxes.)